What could happen if Greece exits the Eurozone


By on May 23rd, 2012.
Connect with this author on

What could happen if Greece exits the Eurozone

What are the implications for my property in Greece if the country exits the Eurozone?

Should speculation become reality and Greece does eventually leave the Eurozone then the new Drachma currency will experience mass devaluation, which in turn will cause the real value of Greek denominated assets to fall sharply. Properties and houses that were once priced in Euros will lose significant value – between 50-80% – as the new Drachma depreciates in the currency exchange market.

What are the potential consequences for Spain/Portugal/Italy if Greece exits the Eurozone?

If Greece leaves the Eurozone then its struggling Mediterranean neighbours of Spain, Portugal, and Italy – who have enormous debt-piles of their own – will be at risk from contagion. Many investors in southern Europe may decide to pre-empt further Eurozone exits and move their funds out of the country which will cause the cost of borrowing (bond yields) to rise dramatically.

If Spain, Italy, and Portugal face runs on their banks then it could lead to huge liquidity freezes, and eventually a banking crisis that would cost the European Central Bank trillions of Euros. If the ECB is not able to cough up this amount of money then banks in Southern Europe could then go bankrupt; this could be dangerous for investments in the region.

How will a Greek Exit affect the value of my property in Spain/Portugal/Italy?

In the event of a Greek exit, the best case scenario for people who own properties in Spain, Portugal, or Italy is a mild drop in value, due to the weakening Euro. If Greece exits the Eurozone then it will make investors uneasy about holding funds within the single currency if they can help it. The Euro will also depreciate as the cost of propping up the rest of the currency bloc takes it its toll on the Eurozone economy.

The worst case scenario for property owners in southern Europe sees Spain/Portugal/Italy joining Greece outside of the Eurozone, and reverting back to Spanish Peseta/Portuguese Escudo/Italian Lira. Under these circumstances property would face rapid devaluation in a similar vein to the prospective depreciation of the New Drachma.

What will happen to value of my property in Germany/France/Netherlands/rest of the Eurozone if Greece exits the Euro?

Property in the core Eurozone states will devalue in line with the depreciation of the Euro. This won’t be as severe as the heavy devaluation of property in defaulting Eurozone countries, but it will still leave proprietors out of pocket.

What impact will a Greek exit have on my British company with exposure to the Eurozone if Greece exits the Euro?

Exports to the Eurozone from the UK will slowdown as the weakened Euro will make it tough for importers to purchase British goods. Exports to defaulting Eurozone nations will almost come to a halt, as the extremely weak new currencies will make it almost impossible to import goods priced in Sterling that are not absolute necessity.

Related posts:

  1. Euro Crisis: How currency devaluation and soaring inflation could actually help Greece if it exits the Eurozone
  2. The pound improved by over a cent against the Euro on Tuesday as attention in the Eurozone turned to Spain
  3. The Pound to Euro exchange rate reached a three and a half year high on Monday of 1.2443 as general elections in France and Greece left financial markets reeling.
  4. A Greek exit would have huge implications for the Eurozone
  5. Eurozone Gross Domestic Product sank to -0.3% in the fourth quarter

Leave a Reply